Benjamin Franklin

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Certainty? In this world nothing is certain but
death and taxes.

• Benjamin Franklin

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33. Lecture 17 Taxes
The hardest thing in the world to understand is
the income tax Albert Einstein
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Now it is time to watch a video clip on Taxes!!!

• Click on the link below
• http//www.brainpop.com/socialstudies/economics/ta
  xes/
• User ID FSUSD
• Password School
• Make sure you view in Full Screen
• Make sure the computer speakers are on!

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You do not need to copy this slide into your
notes!
The Power to Collect Taxes

• American Revolution
• caused debt

• Tax was necessary
• to pay debt

• Article 1, Section 8 of
• the U.S. Constitution
• granted Congress
• power to tax

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Three Major Federal Taxes
Federal Taxes Personal Income Taxa tax people pay on their income Paid to federal most state govts Corporate Income Taxa tax corporations pay on their profits Paid to federal most state govts Social Security Taxa tax paid to the federal govt on income generated from employment ½ paid by employers ½ paid by employees
Remember when taking Cornell Notes you need to
come up with at least 3 questions per page!
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44 comes from Personal Income Tax
38 comes from Social Security tax
7.7 comes from other federal taxes
10.3 comes from Corporate Income Tax
Where the Money Comes From for each dollar the
Federal Government raises from taxes!
2005 data
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You do not need to copy this slide into your
notes!
The Federal Government Dollar- Where It Goes
Medicare, and other Retirement 32
Homeland Security 1
DOD Military 19
Social Security 21
Other 19
Net Interest on the Debt 7
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Three Other Taxes
Other Taxes Sales Taxapplied to the purchase of many goods Collected by states onlyvaries among states Excise Taxesplaced on the purchase of certain goodssuch as tobacco gas Collected by the federal govt many states Property Taxhomeowners pay a tax on the value of their property Major revenue source for state local govts
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You do not need to copy this slide into your
notes!
The State Dollar-
Where It Comes From
Property Tax 32
Individual Income Tax 22
Alcoholic Beverages Sales Tax 1
Tobacco Product Sales Tax 1
Motor Vehicle License 2
Corporate Income Tax 3
General Sales Tax Gross Receipts 25
Motor Fuel Sales Tax 4
All Other 10
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You do not need to copy this slide into your
notes!
The State Dollar-
Where It Goes
Education 30
Social Services 21
Insurance Trust Expenditure 7
Transportation 7
Government Administrative 4
Utility Expenditure 7
Interest on General Debt 4
General Expenditure 5
Public Safety 8
Environment and Housing 7
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The Alternative Minimum Tax
AMT AMTa tax that some people have to pay on top of their regular income tax A minimum tax is computed for a given incomeif you make that income pay at least that amount of taxes you dont pay the AMT. If you pay less than that amount in taxesyou pay the AMT amount. Created in 1969 to prevent persons w/high incomes from paying little or no taxes b/c of tax write-offs. 1969 only 1 of the population paid AMT, today over 3 pay this tax. In 2006, the income was 67,890 for a person filing jointly w/2 children.
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Proportional, Progressive Regressive Income
Taxes
Taxes Proportional Taxeseveryone pays at the same rate, whatever their income level. A.K.A. Flat tax Progressive Income Taxpeople pay higher rates as their income rise. Usually capped. The U.S. has a progressive income tax structure. In 2005, tax rates were 10, 15, 25, 28, 33 35 percent Regressive Income Taxtax rate that decreases as income levels rise.
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Countries with a flat tax structure Countries with a flat tax structure Countries with a flat tax structure
Country Rate Year Introduced
Estonia 26 1994
Lithuania 33 1994
Latvia 25 1995
Russia 13 2001
Serbia 14 2003
Ukraine 13 2004
Slovakia 19 2004
Georgia 12 2005
Romania 16 2005
For your information You do not need to write
this down!
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You do not need to copy this slide into your
notes!
Tax Brackets
U.S. Tax Brackets - 2006 U.S. Tax Brackets - 2006
Single Taxpayer Rate
0-7,550 10
7,551-30,650 15
30,650-74,200 25
74,201-154,800 28
154,801-336,550 33
336,551-and above 35
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Who Pays the Most Tax in the United States? Who Pays the Most Tax in the United States? Who Pays the Most Tax in the United States? Who Pays the Most Tax in the United States?
Income Group Income Split Point Groups share of total U.S. income Groups share of federal income taxes
Top 1 Above 285,424 16.12 33.71
Top 5 Above 126,525 30.55 53.80
Top 10 Above 92,663 41.77 65.73
Top 25 Above 56,401 64.37 83.90
Top 50 Above 28,654 85.77 96.50
Bottom 50 Below 28,654 14.23 3.50
Source IRS 2003
For your information. You do not need to write
this down!
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How long do you have to work to pay all your
taxes?
Taxes The average person has to work from January 1st to April 17th before earning enough to pay for all the taxes owed that year! (do not copy the chart below)
How many days do you have to work to pay your taxes? How many days do you have to work to pay your taxes? How many days do you have to work to pay your taxes?
Year of days spent working to pay all federal, state local taxes Time Period
1980 112 1/1--4/21
1985 108 1/1--4/18
1995 115 1/1--4/25
2000 124 1/15/3
2004 106 1/1--4/15
2004 107 1/1--4/17
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You do not need to copy this slide into your
notes!
TaxFreedomDay
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The following slides are about the IRS Filing
taxes!

• You do not need to write down this information in
  your notebooks.
• This information will help you with Part 5 of
  your project!

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Voluntary Compliance

• Keep necessary records

• Report income accurately

• Correctly calculate tax liability

• File returns
• on time

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Pay-As-You-Go Withholding

• Taxes are paid as income is earned

• Taxes are withheld based on Form W-4 information

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Form W-2

• Shows how much employees earn

• Copy must be attached to tax return

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Financial RecordKeeping
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Financial Record Keeping
Save

• Paycheck stubs
• Bank statements
• Completed tax returns and forms
• Warranty information
• Receipts
• Credit card statements

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Financial Record Keeping
Store items in

• Envelopes or accordion file
• Filing cabinets
• Computer
• Safety deposit boxes

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Tax Liability
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Three Methods of Tax Return Preparation

• Electronically

• Tax Preparation Software

• Manually

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Electronic Tax Preparation and Transmission
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Methods of Electronic Tax Preparation and
Transmission

• Telefile
• Personal Computer
• Tax Professional

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Refunds
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You do not need to copy this slide into your
notes!
Filing a Tax Return

• A tax return is a form on which you declare your
  income to the government and determine your
  taxable income.
• Taxable income is a persons total (or gross)
  income minus exemptions and deductions.

Exemptions are set amounts that you subtract from
your gross income for yourself, your spouse, and
any dependents.
Deductions are variable amounts that you can
subtract from your gross income.
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Lets practice! Click on the links below to
practice filling out the following forms online!

• Filling out a W-4 form
• Filling out a 1040EZ form
• Filling out a 1040 EZ form as a dependent

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ReviewTrue or False

• There are 5 major taxes at the federal government
  level.
• FALSE
• The federal government and some states apply an
  excise tax on some items.
• TRUE
• The alternative minimum tax is a tax that
  everyone pays on top of their regular income tax.
• FALSE
• With a proportional income tax, everyone pays at
  the same rate.
• TRUE

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Summary

• When completing your notes you need to write a
  3-5 sentence summary of the lecture. This is a
  part of your notes grade!

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CLASS WORK/HOMEWORK

• HOMEWORK REMINDER
• Basics 13 due Quiz on Wed 12/5
• Part 4 of the project is due Wed 12/5
• Last Homework Notebook Log Check on Mon 12/10
  or Tues 12/11
• Unit 3 Test on Mon 12/10 or Tues 12/11
• Entire Game of Life Project DueThurs 12/13 or
  Fri 12/14